Monthly Archives: June 2023

June 30, 2023

Deal Lawyers Download Podcast — Survey of CVRs: Key Components and Market Trends

Late last month, John blogged about a recent Sidley memo that reviewed all announced public transactions from January 1, 2018 through April 30, 2023 that included CVRs as part of the consideration and identified the key components of CVRs and trends in their terms. Now, we’ve also uploaded a new podcast featuring the authors of that memo, Sidley partners Sharon Flanagan and Sally Wagner Partin, that covers the following topics:

Overview of CVRs
– Prevalence of CVRs in recent M&A deals, both generally and in life sciences transactions
– Structural issues to consider and standardization of terms of CVRs
– Litigation risk, accounting considerations and other disadvantages to buyers and sellers when using CVRs
– Expectations for the use of CVRs in the near term

We’re always looking for new podcast content, so if you have something you’d like to talk about, please reach out to me at or John at

Programming note: In observance of Independence Day, we will not publish a blog Monday or Tuesday. We will be back on Wednesday.

– Meredith Ervine

June 29, 2023

Extensive Changes to HSR Premerger Notification Form Proposed

Earlier this week, the FTC and DOJ announced significant proposed changes to the Hart-Scott-Rodino (HSR) Premerger Notification and Report Form. As noted in Chair Lina Khan’s statement, this is the first time the agencies have undertaken a comprehensive review of this form in its almost 45-year history. The FTC also posted this FAQ on the Federal Register Notice page, which explains why these changes are being proposed as follows:

The proposed changes stem from a top-to-bottom review of the information collected in the HSR Form by the federal antitrust enforcers at the FTC and the DOJ’s Antitrust Division (the Agencies) to update the information and improve the efficiency and efficacy of premerger review. Additionally, the proposed changes implement mandates as required by the Merger Filing Fee Modernization Act of 2022

The Agencies use information on the form to deploy their limited resources to those transactions most likely to require in-depth review through the issuance of Second Requests. Insufficient information on the HSR Form burdens both the merging parties and the Agencies to collect and confirm basic information not on the form and conduct a rudimentary competition analysis in the initial waiting period, which is typically 30 days.

Over the past several decades, transactions (subject to HSR filing requirements) have become increasingly complex, with the rise of new investment vehicles and changes in corporate acquisition strategies, along with increasing concerns that antitrust review has not sufficiently addressed concerns about transactions between firms that compete in non-horizontal ways, the impact of corporate consolidation on American workers, and growth in the technology and digital platform economies. When the Agencies experienced a surge in HSR filings that more than doubled filings from 2020 to 2021, it became impossible to ignore the changes to the transaction landscape and how much more complicated it has become for agency staff to conduct an initial review of a transaction’s competitive impact.  The volume of filings at that time also highlighted the significant limitations of the current HSR Form in understanding a transaction’s competitive impact.

This Covington alert summarizes the notable proposed changes, which include expanded document production requirements, narrative responses, identification of officers, directors, or board observers, information relating to prior acquisitions and a diagram of the deal structure, among other things. What does this mean for HSR filers? As John previewed last year, if adopted, these changes could substantially increase the time and cost of HSR filings, even for reportable transactions that don’t raise competition concerns. The alert quantifies that impact as follows:

In particular, the FTC estimates that, if the proposed changes take effect, the average HSR filing would require 144 hours to prepare—nearly 4x the 37 hours that the FTC estimates it takes under the current system. The FTC also estimates that for parties with more complex transactions/filings—which it says constitute 45% of all filings—the proposed changes would result in an HSR filing taking 259 hours to prepare, which is 7x the current average. Assuming that the FTC’s estimates are correct, parties to HSR-reportable transactions will require significantly more time to prepare their filings than the typical 10 business days that many merger agreements contemplate.

In the meantime, as noted in the FTC’s press release, the next step is the publication of the Notice in the Federal Register, which will start the clock on the 60-day comment period.

– Meredith Ervine

June 28, 2023

The Stats on the First Season of UPC

Leading up to the 2023 proxy season, there was much debate about how universal proxy would change the game. With a more level playing field and possibly lower costs, would companies see a spike in activism?  In this M&A update, Kirkland analyzed all of the activist campaigns at US-listed companies from September 1, 2022 through June 16, 2023 and compared the data to prior periods. As detailed further below in the key takeaways from the article, UPC did not result in a significant spike in activism in the 2023 season — its impact was more nuanced:

– Activity levels: Activism levels remained high, but fewer campaigns resulted in proxy fights while more settled
– Target size: Activism campaigns targeted companies of all sizes, but the vast majority of proxy fights occurred at smaller companies
– Number of nominees: Activists did not nominate more candidates per slate
– Proxy fight costs: While universal proxy theoretically lowered the cost of entry for an activist, proxy fight costs did not come down and there was no surge in bare-bones campaigns
– Proxy advisor recommendations: While ISS and Glass Lewis continue to require that activists make a case for change, they are placing greater emphasis on individual director qualifications
– Litigation: In a highly litigious proxy season, companies challenged the validity of activist nominations at unprecedented levels
– Success level: Universal proxy may be increasing the odds of at least some activist success, but it has not opened the floodgates

– Meredith Ervine

June 27, 2023

The Latest Analysis of Top 40 Activists

When I hear top 40, I can’t help but think of tuning in Sunday mornings to my local radio station that played Casey Kasem’s American Top 40. This is a very different top 40. Rather than the joy that only came with finally hearing your new favorite song after waiting and waiting by the radio — my kids will never understand — hearing some of these names can cause fear and apprehension (although see this interesting commentary from Bloomberg).

The latest quarterly ownership analysis from Morrow Sodali (available for download) outlines global trends in activist investor portfolios and lists the top 40 activists, split into two tiers based on propensity for active engagement. It also details the largest new positions by activists, analyzes sector exposures and breaks down activist ownership and penetration by region.

From an industry perspective, the report’s summary indicates — not surprisingly — that regional banks saw the largest sub-sector increase in activist positioning with 28 new positions, although it also had many liquidations. Technology also remained an activist focal point in the quarter, with Application Software and Semiconductor sub-sectors having significant new positions.

– Meredith Ervine

June 26, 2023

M&A Trends: Focus on Risk Mitigation & Increased Use of Technology

Deloitte just released its 2023 M&A Trends Survey, now in its ninth year. The survey polled 1,400 executives at US companies and PE firms between October 25 and November 11, 2022 regarding their expectations for M&A activity in the next 12 months and experiences with recent transactions. Here are a few of the key takeaways from the report:

– Given the uncertain times, dealmakers are seeking more certainty and risk mitigation. As such, the survey data uncovered two strategies private equity and corporate leaders are now pursuing with cross-border deals. First, acquirers are increasingly pursuing targets in areas geographically closer to home; and second, dealmakers are prioritizing developed nations more for stability.

– With financing costs higher and other risks ascendant, many companies and funds are behaving more judiciously: smaller M&A deals, more emphasis on restructuring (including spinoffs), and revisiting previous acquisitions and divestitures in search of greater returns. As such, there is a great deal of dry powder—undeployed capital—in the market. There may be attractive opportunities for some corporations and funds to get off the sidelines and invest the cash, as other targets rise in availability and value. Nearly 80% of our respondents expect this trend to continue across 2023.

– Technology is playing an ever-greater role in improving deal process efficiency and effectiveness, and there may be still more it can contribute. We found significant digital initiatives happening in the target identification and deal execution phases of the M&A lifecycle. Where else can digital add to dealmaking?

Meredith Ervine

June 23, 2023

Antitrust: DOJ Overhauls Approach to Bank Mergers

In a speech delivered earlier this week, DOJ Antitrust chief Jonathan Kanter announced that the DOJ will consider a wider range of potential competitive harms in its analysis of bank mergers than those set forth in its 1995 bank merger guidelines. Kanter indicated that the move is prompted by significant changes in the competitive environment for banking and in the needs of consumers for financial services.  This excerpt provides an overview of the DOJ’s new approach:

The division is modernizing its approach to investigating and reporting on the full range of competitive factors involved in a bank merger to ensure that we are taking into account today’s market realities and the many dimensions of competition in the modern banking sector.

In preparing the competitive factors reports that we are required by law to submit to the banking agencies, the DOJ will assess the relevant competition in retail banking, small business banking, and large- and mid-size business banking in any given transaction. These analyses will include consideration of concentration levels across a wide range of appropriate metrics and not just local deposits and branch overlaps. Indeed, the division and the federal banking agencies are working together to augment the data sources we use when calculating market concentration to ensure we are relying on the best data possible and using state-of-the art tools to assess all relevant dimension of competition.

However, our competitive factors reports will not be limited to measuring concentration of bank deposits and branch overlaps. Rather, a competitive factors report should evaluate the many ways in which competition manifests itself in a particular banking market—including through fees, interest rates, branch locations, product variety, network effects, interoperability, and customer service. Our competitive factors reports will increasingly address these dimensions of competition that may not be observable simply by measuring market concentration based on deposits alone.

Simpson Thacher’s memo on the policy change notes that the DOJ’s updated approach represents a “significant shift” away from its approach under the 1995 guidelines, which assesses the competitive impact of a proposed deal at the local level and relies heavily on branch network overlaps and deposit shares.

The memo also points out that Kanter announced that the DOJ will be less willing to accept branch divestitures as a solution to competitive concerns and will no longer provide negotiated divestiture agreements to banking agencies – opting instead for non-binding advisory opinions. The memo says that this change in approach will increase the DOJ’s leverage:

DOJ’s revised approach of no longer providing negotiated divestiture agreements in advance of banking agency approval may also have significant timing implications. Unlike in other industries where to prevent a merger from closing DOJ must obtain a court ordered injunction, in the bank merger context the banking statutes provide that DOJ simply filing a complaint will stay the effectiveness of the bank regulatory approval indefinitely. This gives DOJ additional timing leverage and DOJ may have no incentive to move quickly in the litigation process.

John Jenkins


June 22, 2023

May-June Issue of Deal Lawyers Newsletter

The May-June issue of the Deal Lawyers newsletter was just posted and sent to the printer. This month’s issue includes the following articles:

– Anatomy of a CVR: A Primer on the Key Components and Trends of CVRs in Life Sciences Public M&A Deals

– Chancery Ruling Highlights Important Role of Special Litigation Committees in Maintaining Board Control Over Derivative Litigation

The Deal Lawyers newsletter is always timely & topical – and something you can’t afford to be without in order to keep up with the rapid-fire developments in the world of M&A. If you don’t subscribe to Deal Lawyers, please email us at or call us at 800-737-1271.

John Jenkins

June 21, 2023

Due Diligence: Top Issues for Tech Sector Deals

A recent Gibson Dunn memo provides an overview of the top tech sector due diligence issues in M&A transactions.  This excerpt addresses some of the IP ownership issues that may arise as the result of a target’s receipt of government or university funding:

Funding from government or university sources such as grants, or even the use of university facilities, can often come with strings attached, including ownership or license rights in favor of the funding source. Applicable statutes, grant terms, faculty employment agreements and university policies should
be carefully reviewed to confirm whether a university or government funding source has any consent or intellectual property rights in, or with respect to, the transfer or use of any of the target company’s intellectual property. Further, while during recent years, universities have become more supportive of
their professors launching companies, not all universities have updated their policies regarding the same.

As a result, an acquiror may need to require a target to obtain certain consents or releases from a government or university funding source as a closing condition to a transaction. Outside the U.S., government funding can create tail liabilities that need to be allocated between the acquiror and seller – for example, in Israel, exporting IP developed using in part funds from the Israeli Ministry of Innovation, Science and Technology for development outside of Israel could likely trigger a non-trivial payment.

In addition to issues relating to the ownership of intellectual property, the memo addresses open source software, cybersecurity & cyber insurance, data privacy & data use, employee stock options & 409A valuations, trade secret protection, and trade & anti-corruption compliance.

John Jenkins

June 20, 2023

Private Equity: New ILPA Guidance on Continuation Funds

In recent years, PE fund general partners have increasingly moved certain assets into continuation funds, which allow them to continue to hold the investments while offering limited partners the option to either roll-over their investments into the continuation fund, liquidate their investments or engage in some combination of both alternatives. However, a recent Institutional Investor article pointed out that LPs are concerned about the potential for abuse involved in these transactions, and that this has prompted the ILPA to issue new guidance for GPs and LPs on these transactions. Here’s the executive summary:

General Principles:

1. Continuation fund transactions should maximize value for existing LPs
2. Rolling LPs should be no worse off than if a transaction had not occurred

Rationale & Conflicts:

1. The GP should present the rationale for a continuation fund transaction to the Limited Partner Advisory Committee (LPAC), and should have explored alternative options for the selected asset
2. The LPAC should vote to waive conflicts of interest associated with the process of the transaction. GPs should bring all conflicts to the LPAC, whether or not conflicts are pre-cleared as per the LPA
3. A competitive process should be run to ensure a fair price was obtained; the process should include third party price validation
4. The GP should disclose the necessary information about the selected assets, the process, the rationale and the bids in a timely fashion to the LPAC when considering conflict waivers and to all existing LPs to facilitate roll or sell decisions

Process & Timing:

1. The continuation fund transaction process should conform with the relevant provisions of the existing fund LPA. GPs should avoid LPA terms that pre-clear conflicts of interest associated with these transactions
2. GPs should engage experienced advisors to facilitate the transaction. The GP should disclose any potential conflicts of interest with the advisor and the commercial arrangement. The advisor should be made accessible to the LPs
3. LPs should be afforded no less than 30 calendar days or 20 business days to make roll or sell decisions

Terms & Documentation:

1. Rolling LPs’ side letters should apply to the continuation fund where relevant. At a minimum, all relevant risk and governance terms agreed to in the existing fund side letter should apply
2. There should be no increase to the management fee basis or percentage for rolling LPs
3. There should be no increase to the carried interest rate or decrease to the preferred return hurdle
4. There should be no crystallization of carried interest for rolling LPs
5. All carried interest accruing to the GP related to interests from selling LPs should be rolled into the new continuation vehicle

Recommendations for LPs:

1. LPs should establish internal protocols to respond to these transactions, such as approval processes, underwriting processes and understanding statutory requirements
2. When transactions arise, LPs should work with GPs to set timing expectations around reviews, negotiations and approvals
3. When transactions arise, LPs should request that GPs provide documentation, models and materials necessary to be fully informed; there should be a symmetry of information between existing LPs and prospective new buyer

The ILPA document says that, in addition to the conflicted nature of these transactions, specific LP concerns giving rise to the need for guidance include the complexity of these transactions & the resulting time and attention required by LPs to evaluate them, the necessity for LPs to make decisions about individual assets in a fund, the speed at which these transactions are executed & the short period of time LPs have to make investment decisions about them.

John Jenkins

June 16, 2023

A Survey of Bylaw Amendments for UPC

For companies that elected to put off considering UPC bylaw amendments and officer exculpation proposals until after this proxy season, White & Case recently released the results of a survey of developments in both these areas through June 1st. Two hundred companies in the S&P 500 have recently amended their bylaws for UPC (and shareholder activism generally), and the survey included an in-depth review of 100 of those bylaw amendments. The UPC-focused amendments were meant to ensure that the bylaws properly address the process and mechanics in the event of a contested election using UPC. Here’s an excerpt:

In our in-depth survey of 100 S&P 500 companies that amended their bylaws, we found that 90 percent or more did so to:

– Provide that a nominating shareholder must satisfy all of the requirements of Rule 14a-19 in order to be eligible to nominate directors. If these requirements are not met, the company may disregard the shareholder’s nominees and not include them on a universal proxy card.
– Specifically require that the dissident shareholder’s notice include a statement of the shareholder’s intent to comply with Rule 14a-19, including referencing Rule 14a-19(a)(3) or specifically setting forth the requirement that the shareholder solicit the holders of shares representing at least 67% of the voting power of outstanding shares.
– Require that the nominating shareholder provide reasonable evidence of compliance with the requirements of Rule 14a-19 before the shareholders’ meeting.

Moreover, the surveyed amendments generally clarify that a shareholder nominating directors pursuant to the universal proxy rule is subject to the company’s existing advance notice deadline (typically at least 90 days before the one-year anniversary of the prior year’s annual meeting), rather than the 60-day minimum set forth in Rule 14a-19(b)(1).

What about other activism-related amendments? Here are stats from the survey:

– 45% added a requirement that a shareholder soliciting proxies in a proxy contest must use a proxy card color other than white, in order to distinguish its proxy card from that of the company.
– 17% added language to limit the number of directors that can be nominated by a shareholder to the number of directors up for re-election. This type of provision could block a dissident from first identifying a longer list in its notice and delaying the identification of which specific nominees it will choose to stand for election until it files its proxy statement.
– 5% added language to provide that if the company receives proxies for disqualified or withdrawn nominees, such votes will be treated as abstentions. This provision allows such abstention votes to be counted towards a quorum at a shareholders’ meeting.

– Meredith Ervine